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Thursday, February 23, 2012

The Cultural and Political Economy of Recovery: Social Learning in a Post-Disaster Environment

Emily Chamlee-Wright’s latest book, The Cultural and Political Economy of Recovery, has been awarded the F. A. Hayek Prize from the Atlas Economic Research Foundation, and rightly so.

A professor of economics at Beloit College, Chamlee-Wright draws insights from a variety of disciplines to explain the processes of recovery endured in the Gulf Coast region after Hurricane Katrina. She synthesizes insights from social network theory, Austrian economics, cultural economics, and the growing literature on natural disasters to make meaningful this complex mix of human decisions and social behaviors that will forever be a part of American history. In the process she makes a valuable contribution to refocusing the social sciences on their proper object of inquiry: people as individuals and in groups.

In The Counter Revolution of Science, Hayek described why and how the physical sciences purged humanism from their disciplines. Presuming that physical phenomena operate like people acting intentionally can lead to serious error. Thunder does not result from the anger of the gods.

Hayek explained that this purging unfortunately also affected the social sciences. Positivism, scientism, formal modeling, and empirical measurement became the dominant techniques to assure objectivity in economics and most other social disciplines. But to purge the human element from social science is to ignore the essence of the very subject matter we seek to understand—real human behavior and decision-making.

Nobel laureate Vernon Smith coined the term “contextual rationality” to describe behaviors that, although seemingly costly and/or irrational, are on closer reflection effective reactions to unique environmental constraints. The ability of outside observers to recognize rationality is restricted by their own limitations in recognizing the incentives, knowledge, and constraints faced by an actor.

Chamlee-Wright’s version of social science, like those surveyed above, is one that recognizes the reasons so many people since Katrina have endured extreme costs, forgone significant alternatives, and in many cases have carried significant risk to return and rebuild the city of New Orleans. Though an imperfect paraphrase, she describes the recovery as a symbiotic relationship amid flux. The citizens contribute to a stock of social knowledge and social value that feeds their community’s identity, culture, and economic welfare. Vice versa, the city provides a navigable network of social, pecuniary, and intangible benefits to those who returned to her. These people loved their families, their neighbors, their places of business, and the city of New Orleans.

Knowing what actors hold as their abstract goals and knowing what they believe to be their optimal strategies helps reveal the rational character of their behaviors. What better way to start than by simply asking them?

Chamlee-Wright’s most innovative contribution to humane economics is her unique method and source materials. Her own form of introspection is a micro complement to Deirdre McCloskey’s. As McCloskey tunes into literature, culture, and folk narrative to allow society to reflect on itself, Chamlee-Wright allows real people to self-reflect by offering personal testimonies. Her open-ended interviews expose the procedural elements of recovery, discovery, innovation, and adaptation that “mainstream” perspectives often overlook. Where conventional political economy models, such as market-failure theory and public-goods logic, presume a necessary role for central planning in disaster recovery, Chamlee-Wright’s subjects seem not only capable of serving their recovery needs themselves; they are also ingenious discoverers of solutions that government bureaucrats would never recognize.

I have lived in New Orleans since 2008. Like Chamlee-Wright I am fascinated by my neighbors’ narratives about government failure after the storm. I trust that New Orleanians themselves know the best ways to structure their lives within their unique city.

Early in the book Chamlee-Wright quotes Thomas Schelling, who offers the opinion that “[t]here are classes of problems that free markets simply do not deal with well. If ever there was an example, the rebuilding of New Orleans is it.” I believe most of the residents she interviewed would read her book and say something like, “If free markets are just people, Chamlee-Wright is much more correct about New Orleans than Schelling.”

Not many residents would think that more FEMA activity would have made things better. I’d go so far as to bet that many would find it insulting to suggest that government assistance made the revival of the city and its culture today possible. The reality is that the returners have worked very hard to rebuild the city they loved and have done so through their own efforts. Credit is not due to government help and planning. That is the big message of the book—free people can and will recover from natural disasters through the voluntary mechanisms of the market and civil society.

  • Daniel J. D’Amico is the Associate Director of The Political Theory Project and a Lecturer in Economics at Brown University where he teaches and coordinates student programs dedicated to the study of institutions and ideas that make societies free, prosperous, and fair. Before beginning at Brown in 2015, Daniel was awarded the level of Associate Professor of economics at Loyola University New Orleans, where he garnered awards for teaching, research, and service.